The death spiral explained

A “death spiral” in business describes a downward cycle of negative events that can ultimately lead to an organization’s failure. This vicious cycle can result from financial decline, operational inefficiencies, or poor strategic decisions. In marketing, a “death spiral” occurs when reactive budget cuts to declining performance further worsen outcomes, creating a self-reinforcing loop that’s challenging to reverse.

In recent years, we’ve observed clients facing significant challenges navigating the “death spiral” in performance marketing. Reacting to declining returns, they often made substantial budget cuts to maintain ROAS or focus on seemingly more profitable channels. Unfortunately, these decisions frequently backfired, leading to reduced visibility, fewer conversions, and declining revenue—further deepening the spiral.

This highlights the urgent need for a mature, data-driven marketing approach. 

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Cutting budgets due to imperfect information

Lack of insights due to lack of time

Many SMBs make budget cuts not because of actual inefficiencies, but because they lack the necessary insights to make informed decisions. Studies show that over half of SMBs spend less than an hour daily on marketing tasks, leading to inconsistent decision-making and missed optimization opportunities (ndash.com). Additionally, SMBs often struggle with insufficient market research. Without the time or expertise to conduct data-driven analysis, many businesses make budget cuts based on surface-level performance metrics. This can result in over-prioritizing short-term ROAS while neglecting long-term brand-building and customer retention (salesforce.com).

Lack of understanding of how to invest

Another challenge is economic uncertainty and risk aversion. Many SMBs hesitate to invest in marketing when revenue fluctuates. This cautious approach, however, can backfire, as reducing ad spend during downturns can shrink brand visibility and weaken competitive positioning (ndash.com).

Without cross-channel insights and accurate attribution, many SMBs fail to see how different channels contribute to the bigger picture. They may mistakenly cut budgets on campaigns that don’t seem profitable in isolation but actually drive significant revenue when viewed holistically. The absence of comprehensive performance analysis often leads to reactive, short-term thinking, exacerbating the risk of entering the death spiral.

This fragmented approach leads to:

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Reactive strategies: Premature budget cuts based on isolated metrics.

Many companies cut marketing budgets based on perceived performance, striving to find an equilibrium where spending yields optimal returns without waste. However, we’ve consistently observed a decline in remarketing campaign performance, particularly from website audiences. This erosion has significantly impacted ROAS and profit metrics across industries—an issue we’ve encountered firsthand.

The shift from third-party cookies to first-party data has disrupted remarketing and brand-related sales. This transition has reduced audience targeting capabilities.

According to an Adobe study, 37% of marketers reported a negative impact on their ability to track, target, and measure consumer engagement due to third-party cookie deprecation (Adobe). Additionally, businesses have seen a 20-30% decrease in audience sizes for remarketing lists across multiple industries (Amperity). This reduction in audience targeting capabilities has directly impacted campaign effectiveness and forced many businesses to reconsider their marketing spend. These challenges often stem from smaller remarketing pools, causing performance fluctuations (Experian, 2024, Lunio).

Many companies cut marketing budgets based on perceived performance, striving to find an equilibrium where spending yields optimal returns without waste. However, we’ve consistently observed a decline in remarketing campaign performance, particularly from website audiences. This erosion has significantly impacted ROAS and profit metrics across industries—an issue we’ve encountered firsthand.

The shift from third-party cookies to first-party data has disrupted remarketing and brand-related sales. This transition has reduced audience targeting capabilities.

According to an Adobe study, 37% of marketers reported a negative impact on their ability to track, target, and measure consumer engagement due to third-party cookie deprecation (Adobe). Additionally, businesses have seen a 20-30% decrease in audience sizes for remarketing lists across multiple industries (Amperity). This reduction in audience targeting capabilities has directly impacted campaign effectiveness and forced many businesses to reconsider their marketing spend. These challenges often stem from smaller remarketing pools, causing performance fluctuations (Experian, 2024, Lunio).

How to get on top of your marketing data

Without these tools, SMBs struggle to assess marketing effectiveness, increasing the risk of falling into the “death spiral.”

Integrating cost data into attribution platforms allows businesses to shift from evaluating campaigns solely based on ROAS to using POAS (Profit on Ad Spend), offering a clearer picture of profitability. This approach enables more precise budget allocations and better campaign management, focusing on true profit rather than just revenue. Very often on larger setups with various product margins mean a huge difference in terms of understanding what is actually profitable. As a result, the big upside is better profit optimisation.

Image: Profit overview dashboard from Reaktion.com.

Integrating your data into the right platform

With the growing complexity of digital marketing, SMBs and enterprises alike have a vast selection of SaaS platforms to choose from. The right attribution and marketing mix modeling (MMM) tool can help businesses optimize their spend and make data-driven decisions—but not all platforms serve the same purpose.

The table below breaks down the major categories of marketing analytics tools, showing which platforms focus on e-commerce profitability, multi-touch attribution, or full-scale MMM for enterprise-level media spend.

Use this overview to identify which solution best fits your business model and how it can help improve your marketing efficiency, profitability, and strategic decision-making.

Leveraging advanced attribution and analytics platforms provides a comprehensive view of the customer journey, revealing a more true value of marketing efforts across channels. Tools like ProfitMetrics.io and Reaktion.com excel in real-time aforementioned profit tracking, multi-touch attribution, and server-side tracking.

For instance, one of our clients experienced a significant turnaround in audience performance after implementing these tools. Within six months, they reversed declining audience trends, demonstrating how enhanced tracking and attribution can lead to tangible improvements in marketing efficiency and effectiveness.

These platforms not only help in optimizing current marketing strategies but also provide the data-driven insights necessary for making informed decisions that foster long-term growth. Here are the main features listed to combat the death spiral:

Focus on the SMBs: How much do these e-commerce attribution platforms cost?

Pricing for these platforms varies greatly depending on factors such as sales volume, the number of orders, and the features required. Here are a few examples.

Triple Whale bases its pricing on your Gross Merchandise Value (GMV) and feature needs. For businesses with a GMV of $1 million over the past year, their “Growth” plan is priced at approximately $1,290 per month. However, they also offer a free “Founders Dash” plan, providing real-time insights into key business KPIs.

Considering the potential return on investment from improved marketing efficiency, these platforms present a valuable opportunity for SMBs looking to escape the “death spiral” and drive sustainable growth.

What are the limitations for the attribution platforms?

Attribution software provides valuable insights into customer journeys, but its effectiveness is often limited by predefined attribution models. These models, such as first-touch and last-touch attribution, are structured ways of assigning credit to different marketing channels, yet they do not fully account for the complexities of modern consumer behavior.

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  First-Touch Attribution:
  Assigns full credit to the first interaction a customer has with a brand, often overvaluing top-of-funnel activities.

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  Last-Touch Attribution:
  Gives all credit to the final interaction before conversion, overlooking the importance of earlier engagements.

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  Linear Attribution:
  Distributes credit equally across all touchpoints, oversimplifying the influence of each channel.

Google has already moved toward a data-driven attribution model, which uses machine learning to determine how different marketing touchpoints contribute to conversions. Windsor.ai, for example, employs a Markov model, which improves attribution accuracy by removing touchpoints that don’t contribute to conversions and focusing on actual conversion-driving paths.

These limitations highlight the need for a nuanced approach to attribution and further deep dives into data modeling. Here’s an excellent video from Windsor.ai explaining the current situation.

Video: Attribution modeling (MTA) vs media mix modeling (MMM). Whats the difference?

Source: Windsor.ai’s Youtube Channel

Actions to break the death spiral for SMBs

To escape the marketing death spiral and build sustainable growth, SMBs must move beyond short-term reactive cuts and implement data-driven, profitability-focused strategies. The following steps will help SMB businesses take control of their marketing performance, optimize ad spend, and strengthen long-term resilience.

And it doesn’t cost a fortune. In fact, SMBs will have optimal chance of breaking the death spiral and a postive growth trajectory.